Australia has proposed requiring large data centres to secure sufficient firmed electricity supply from new renewable generation and storage assets within their own states or territory, or risk facing financial penalties and potentially load shedding.
The proposal came from climate change and energy minister Chris Bowen, who submitted two rule change requests to the Australian Energy Market Commission (AEMC). The requests, published by the AEMC on 28 October, seek amendments to the National Electricity Rules that would create a mandatory contracting obligation for qualifying data centres, as the government moves to manage the reliability and price impacts of rapidly rising power demand from that sector.
Under the proposals, data centres above certain size thresholds or operational profile — that are yet to be defined — would need to demonstrate that their electricity demand is backed by eligible firming arrangements, including new renewable generation, storage and dependable demand flexibility located in the same National Electricity Market (NEM) region as the facility.
Data centres would need to contract sufficient firmed capacity to match their load profile and support investment in new renewable generation, storage and demand response. The government said this would help ensure the costs and reliability risks associated with large new loads are not transferred to other electricity consumers.
Eligible firming arrangements could include power purchase agreements (PPAs), cap contracts, tolling agreements, behind-the-meter batteries and demand response resources. A data centre's compliance would be assessed against its overall portfolio of contracts and resources rather than individual agreements.
Data centres that failed to comply would be subject to enforcement action by the Australian Energy Regulator (AER) or the Australian Energy Market Operator (Aemo), including financial penalties and potentially even load shedding.
"Under this approach, a non-compliant data centre could be required to reduce its demand until it demonstrates sufficient firm contract coverage as required by the obligation," the change request said.
The AEMC has not yet initiated the rule change process, which will include consultation papers seeking stakeholder feedback.
The request follows concerns over the scale of forecast demand growth from the sector. The latest Electricity Statement of Opportunities (ESOO) from Aemo forecasts data centre electricity consumption rising to around 15TWh by 2029-30 and about 34TWh by 2035-36, equivalent to around 7.8pc and 13pc respectively of NEM operational demand.
The Australian government last month released its national artificial intelligence (AI) standards framework for consultation, proposing that large-scale data centre operators surrender renewable energy certificates equivalent to their annual electricity consumption.
Before that, the federal government reached a compromise with Queensland and the Northern Territory, allowing jurisdictions with government-owned utilities to use existing generation assets where surplus capacity exists, rather than relying exclusively on new renewable projects.
The new change request does not exclude non-renewable power generation but prioritises new renewable generation and storage.
"While the presence of non-renewable backup generation or other supporting technologies should not necessarily preclude access to the framework, the intent is not to facilitate data centres that are co-located solely with non-renewable generation," the proposal reads.
