Australia's AI datacentre boom raises concerns over renewable energy commitments

Tucked away at the end of a media release from the Australian Energy Market Operator this week was a data point worthy of national attention.

Releasing its annual snapshot of electricity supply and demand, the regulator revealed consumption by datacentres in Australia was forecast to increase from about 3% of all electricity supplied through the national grid today to about 13% by 2035.

High growth in the soulless warehouses powering the AI boom is on track to see their total electricity consumption reach 52 terawatt hours – a tenfold increase over the decade. In addition to 165 datacentres already operating around the country, another 225 are in development.

It’s little wonder that local MPs, especially in the major growth areas of Sydney and Melbourne, are closely tracking the hyperlocal politics of these controversial developments, or that the Albanese government is gearing up for a major legislative push on AI soon after the summer break.

That plan – confirmed this week to include not only nationally consistent planning and environmental laws, but also tough new copyright protections for the work of Australian writers, film-makers, artists and journalists – could be one of the major fights in parliament between now and the next federal election. The new laws will be designed to maximise the opportunity of AI’s development, and control the challenges stemming from the large infrastructure required.

But landing the plan, including tough negotiations with state leaders and cashed-up interests in the powerful global technology sector, will be difficult. On this measure, the Albanese government had a mixed start.

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Going into Wednesday’s meeting of the national cabinet, the prime minister was clear exactly what would be required of datacentre proponents under the new national laws. Put simply, he said new developments would be required to run on renewable energy, must not push up power prices for consumers and businesses, and must make a positive contribution to the transition away from fossil fuels. Separate and equally important rules on water supply and land use were also made clear.

But, as is becoming a pattern, some of the country’s conservative-led states and territories spoke up with reservations about the national approach and used the meeting to put pressure on Anthony Albanese.

Queensland’s Liberal-National premier, David Crisafulli, backed by hardline opponents of renewables in the sunshine state, wanted access to coal and gas. From the Top End, the Country-Liberal chief minister, Lia Finocchiaro, said the Northern Territory’s massive Beetaloo basin project needed to be part of the picture too. Both wanted carve-outs from the rules for their jurisdiction.

Concessions were made in the meeting, and Albanese talked up flexible outcomes and cooperation in the press conference afterwards. A written communique had only scant detail but quickly both Crisafulli and Finocchiaro claimed major wins. The federal opposition crowed that the government had been rolled on its renewables mandate.

On Friday, the energy minister, Chris Bowen, moved to correct the record, insisting that the planned rules will still be the same for everyone and no carve-outs will apply for any state.

Bowen stressed the Australian Energy Regulator will have to approve any development application proposing to rely on coal and gas. They would only be approved if it could be demonstrated to be cheaper than renewables, something the federal government believes will be hard to do. State-owned systems could apply for an exemption, but the commonwealth will have the power to decide whether it is granted.

The Grattan Institute energy expert, Tony Wood, agreed gas power was unlikely to be cheaper than new wind or solar, though he conceded the negotiated outcome may indeed represent a carve-out.

This is likely the first of a few negotiations as the big bill is settled in the coming months. But after promising world-leading AI regulations and that the huge growth of datacentres under way in Australia would not hurt emissions reduction goals, Albanese should insist on his foundational principles. Rules requiring proponents to add additional power to the network should not be forgotten either.

The Smart Energy Council chief executive, David McElrea, said on Friday that on the face of it it seemed that the prime minister had allowed coal and gas into the equation. The council represents the renewable energy industry.

“This contradicts his earlier unqualified promise that all AI datacentres would be powered by new renewables,” McElrea told Guardian Australia. “If he allows this to occur, it will drive up power bills for Australians and lock in expensive, unreliable fossil fuels that increase climate pollution.”

One of the broader questions Australia needs to ask about AI is what larger economic and societal benefits the country can or should expect from the promised development and productivity boom.

Companies working in the space will benefit from the relative strengths of the Australian economy and environment, but will huge datacentre growth lead to new tax revenue for the federal budget? It is likely the multinational interests behind datacentres are already working to ensure they can take their profits to more friendly jurisdictions overseas and run operations with the smallest employment footprint possible.

Even if we can’t fully grasp it yet, the results of the settings being considered will play a role in what kind of country Australia will be in the future. The prime minister’s push for a framework that strengthens communities and reduces reliance on carbon-heavy power supply shouldn’t be traded away in the first steps on legislating AI.

The difference is more than a semantic fight about exactly who gets a carve-out from the rules.