Data centres could consume 13 per cent of National Electricity Market power by 2036. Australia should require them to bring new firmed renewable energy rather than add pressure to the grid.
We all saw the shocking scenes last week as a glacier collapse in the Himalayas produced a biblical flash flood on the Nepal-Tibet border, obliterating everything in its path. The impact was such that it triggered seismic activity signalling an earthquake. Panicked people tried desperately to outrun a churning wall of water metres high. At the time of writing, over 900 are dead, swept away in the raging torrent, with thousands missing, villages and infrastructure destroyed, and scores of Australians unaccounted for.
Like the heatwaves, drought and fires in Europe and Canada this northern summer, this is yet another of the consequences of the rampant destructiveness of the fossil fuel industry, privatising massive profits while socialising the existential costs of climate catastrophe in a relentless cascade of globe-spanning disasters, abetted by spineless political puppets.
The time for excuses is long over. Yet back home, on the same day as the Nepal disaster, media reports suggested that at a national cabinet meeting, Prime Minister Anthony Albanese had walked back his government’s commitment to legislate that Australia’s rapidly burgeoning data centre rollout will be powered with 100 per cent renewable energy as a condition of approval, capitulating to the Northern Territory and Queensland governments’ demands for exemptions. It was understood that the prime minister had granted those states carve-outs from the clean energy provisions.
Previously, Minister Bowen had made assurances that the federal government would use its constitutional powers to override these states’ objections to the renewables mandate, requiring that the centres’ proponents – foreign tech broligarchs – BYO additional clean energy. Albanese and Assistant Minister for Science, Technology and the Digital Economy Andrew Charlton had similarly positioned clean energy as pivotal to data centre policy.
Minister Bowen subsequently denied that concessions had been made . He reaffirmed that nationally consistent standards embodied in Commonwealth legislation will require data centres to be “run by renewables, with peaking and firming using gas”. These standards, he said, will cover “every state and territory including NT and QLD without exceptions”.
According to Bowen, the only change from the government’s previous position is that “if a state-owned energy firm feels that they can power a data centre cheaper than with renewables, they can make that claim to the Federal Government. We’ll have the Australian Energy Regulator … assess it”. In Bowen’s view, it’s a case of ‘nothing to see here’, since “it would be very, very difficult indeed for a state energy company to establish to the Commonwealth’s satisfaction” that fossil fuels are cheaper than renewables.
This clarification is welcome given that data centres are an issue of major and growing national significance – and that Australia’s federated structure is challenged by the Queensland LNP’s climate science undermining. The scale of the data centre energy burden is huge: these behemoths’ share of consumption in the National Electricity Market (NEM) was projected in August by the Australian Energy Market Operator (AEMO) to rise sevenfold to 13 per cent by 2036 . This figure appears to be escalating from AEMO’s previous estimate in June. There are upwards of 220 data centre proposals on the table, with 165 already in operation.
We note the Albanese government’s record of unconscionable approvals of new coal and gas and its capture by fossil fuel vested interests. This dissonance undermines its brilliant strides on large-scale and distributed renewables. It means it is failing to properly tax gas multinationals’ profits to return some benefit to the people, put a stringent enough price on carbon to force industrial climate laggards to decarbonise, or to reform the $11 billion annual taxpayer subsidy for imported diesel, a fossil fuel.
The pace of the AI revolution is unprecedented. The boom presents a massive investment opportunity for Australia, and could and should be leveraged in the national interest to accelerate our energy transition for the good of all. The government has one chance here to get data centre policy right from the outset – it is the Albanese administration that will set the terms for how this dramatic social, economic and technological transformation is managed, and its era-defining impacts on Australians.
This requires political courage and regulatory rigour. Any backflip puts at risk our emissions reduction targets of 43 per cent by 2030 and 62–70 per cent by 2035 (new emissions reduction figures released last week by DCCEW show a 1.6 per cent reduction in the year to March 2026, not fast enough to achieve our goals). It would accelerate the escalating climate catastrophe. And it would further erode the almost non-existent social licence for these gigantic monoliths to late-stage capitalism, as local community opposition grows.
Climate Energy Finance (CEF) spoke at a recent data centre conference where the industry was mostly aligned with the federal government’s position that the data centres must be required to bring water and new zero emissions energy, or risk their already fragile social licence. Failure to do so would see the delays and cost blowouts apparent in our grid transmission buildouts and wind energy sector.
Queensland Premier Crisafulli continues to agitate, suggesting Bowen’s position is at odds with Albanese’s “maturity and pragmatism”.
We urge the government to resist any further pressure from the states, and move quickly to legislate the binding requirement for firmed renewable energy – avoiding loopholes the coal and gas-addicted states may seek to exploit. This condition should be coupled with the public benefit principles we and our partners outlined here, including that data centres strengthen grid stability, be appropriately sited to minimise impacts on nature and land, use scarce water resources responsibly, operate with transparency, and earn ongoing social licence.
The alternative would make the Albanese government complicit in fuelling a cascading climate polycrisis that has people literally running for their lives, just as the super El Niño arrives on our doorstep.
AM Jonson
Dr AM Jonson is editorial director of CEF.
Tim Buckley
Tim Buckley is director of leading independent think tank Climate Energy Finance (CEF) and a former MD of global investment bank Citigroup.