Data centres drive significant boost in grid demand for Australia’s biggest energy retailer

• Australia’s biggest energy retailer, and the owner of the country’s biggest coal fired generator, has reported a significant boost in electricity sales volume in the latest quarter, largely driven by data centres.

Origin Energy says electricity sales volumes increased by 4 per cent in the March quarter, compared to the same period a year earlier, a significant change in the trend over the last two years.

Normally, at this time of the year, Origin reports at best steady sales as the growth of rooftop solar and energy efficiency offsets any increase in retail and business demand.

Not this time. And the results are significant because data centres are seen as one of the biggest changes in the Australian grid, because of their insatiable energy use and concerns about its impact on supply and demand.

“Origin continued to grow its share of Australia’s data centre market, and we’re well positioned to support the further growth in demand from this sector through grid connections, long-term renewable contracts, and on-site solar and batteries,” Origin CEO Frank Calabria said in a statement.

“Our generation fleet maintained good reliability, and we’ve secured most of the coal supply for Eraring for FY27.”

Some say data centres represent an opportunity to contract and grow Australia’s renewable energy capacity, particularly given the lack of interest by other corporate players and the reluctance of big utilities, like Origin, to build their own wind and solar despite flagging the imminent closure of their coal fired power stations.

Origin had flagged in 2022 the potential early closure of Eraring in August, 2025, but has since delayed that closure date twice, now to 2029, arguing that not enough replacement capacity has been built. Origin Energy itself has not built or commissioned any in that time frame.

Origin sells around 36 terawatt hours of electricity to its customers each year, with the Eraring coal generator generating nearly half of that, just short of 16 TWh. AGL Energy still sources 80 per cent of its generation from coal fired power.

The fear is that data centres will add to growing fossil fuel generation, and despite the efforts of the likes of Fortescue to spend nearly $1 billion on an off-grid renewables supply in the Pilbara, others are turning to gas fired generation, particularly in the US.

That would be a shame, because as Origin’s own data shows, gas fired generation is on the decline in Australia, with gas volumes down 32 per cent, largely because of the fall in gas generation, driven by a combination of increased rooftop solar output and growing amounts of battery storage.

Interestingly, Origin Energy also report a fall in the average realised LNG price, and lower sales volumes. Calabria indicated higher prices as a result of the Middle East conflict will emerge later.

Global commodity markets have experienced significant volatility this quarter, with the conflict in the Middle East affecting oil and LNG supply,” he said. “Changes in oil prices have a lagged effect on Australia Pacific LNG’s long term export contracts, and we do not expect this to flow through to results until FY27.

“In Australia, our domestic electricity and gas markets have remained well supplied and largely insulated from these global price movements, which is good for households and businesses. The duration and trajectory of the conflict will ultimately determine the longer-term impact on energy markets.”

However, Origin Energy also flagged a downgrade in expected earnings from its previously high flying Octopus Energy business, largely as a result of regulatory changes in the UK,. high gas capacity charges and adverse weather in February and March.

Origin’s share of pre tax earnings from Octopus for the current financial year is now expected to range from minus $70 million to +$30 million, compared to previous guidance of $0-150 million.

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