Anthony Albanese has been clear that he wants a set of national standards to ensure datacentre growth accelerates Australiaâs push to renewables and keeps a lid on power prices. At the centre of his desired policies was a âBYO powerâ requirement â a condition that all new datacentres would be powered by 100% renewable electricity.
But last week these aims collided with the Queensland and Northern Territory governmentsâ desire to rely on their state-owned gas and coal power stations to power datacentres.
As a result, we got a national cabinet communique that was carefully worded to allow every first minister to claim a win, but little clarity about what rules would apply.
On Friday, the energy minister, Chris Bowen, reiterated the federal governmentâs intent to legislate binding national standards for datacentres across the country which will require them to use 100% renewables, backed by firming â which can be gas.
The potential for a carve-out is still there, with Bowen saying the federal government would consider concessions â but only if state-owned generation can provide a cheaper power mix.
At first glance, this looks unlikely. Electricity costs are about 10% of total expenditure for a datacentre. Gas is the most expensive form of generation, and new coal is more expensive than new renewables. Even existing coal gets undercut by cheap solar for much of the day. Existing centres are already choosing to run on about 70% renewable electricity, through a power purchase agreement with a wind or solar farm, because they want to keep their costs down.
Using gas and coal power (as Queensland and the NT are pushing for) would probably increase electricity costs for datacentres. It would also probably delay their development, because the waitlist to receive new gas turbines is years-long.
In any case, the energy source for potential new datacentres is only one part of the picture.
Most datacentres need to be close to population centres to allow customers to send and receive data instantaneously. This is why the vast bulk of existing datacentres in Australia, and 85% of the proposed ones, are located in Sydney and Melbourne.
If a fossil-fuel driven datacentre boom hasnât happened in Australiaâs north already, itâs not likely to in the future, unless the population shifts markedly and datacentres develop a taste for expensive electricity.
This doesnât mean NSW and Victoria can take future datacentre development for granted. If new wind and solar farms canât be built as fast as new datacentres, this will act as a brake on growth. For the federal legislation to have an impact, all three governments need to double down on making it easier to finance and build new renewables.
The spat over datacentre guidelines exposes more than just federal and state differences. It highlights the two biggest problems in the energy sector: there are no restrictions on electricity emissions, and weâre not building fast enough to meet all sources of new demand, not just datacentres.
Apart from the two years where Australia had a carbon price, electricity generators have never been forced to reduce their emissions. Instead, governments have focused on pushing more renewables into the electricity mix. Provided they could push these in faster than demand was growing, emissions went down, as coal generators were undercut and lost market share.
We are now bumping up against the limits of this approach.
If we restricted electricity emissions, the coal and gas v renewables part of the datacentre debate could be avoided. The âBYO powerâ push could be technology-neutral because the restrictions would have taken care of the emissions impact. Focus would be on the impact of datacentres on power prices and the reliability of supply.
Datacentres make up just 17% of future power demand growth. The rest is from increased take-up of electric vehicles, households and businesses converting to electricity and population growth.
Even if datacentres went elsewhere, we would still be facing the problem that weâre not building enough electricity infrastructure fast enough to meet our needs. This includes new renewables, but also the transmission lines to connect them to demand centres, the batteries and storage to keep the system reliable and the back-up generation to ride through the few days of the year when renewables alone canât support the whole system.
The future Australia economy should run on electricity: itâs cheaper, cleaner, and more efficient. Meeting all these needs will require a much bigger electricity system. Datacentres are the first test of how well we meet this challenge.
If we start constraining electricity emissions, and make it easier to build electricity infrastructure, weâll give ourselves the best chance of doing so.
