Data giant says its happy with renewable mandate, but Queensland and NT snub Canberra and go for gas

Queensland is using weasel words around competition to justify rejecting national rules to make data centres invest in new renewable energy, after promising almost $2 billion of taxpayer funds last year to support coal and gas in the state.

The Queensland LNP government on Tuesday took the extraordinary step of dissenting from an entire state and federal ministerial communique that included backing for a federal proposal to require data centres to invest in new renewable energy sources to power their operations.

Queensland and the CLP government in the Northern Territory both refused to endorse the proposal – welcomed by other states, including NSW and Victoria, where most of the investment is going – in the hope that data centres would be drawn to their existing and untapped fossil fuel reserves.

Queensland treasurer and energy minister David Janetzki on Wednesday justified the decision by saying Queensland wants data centres to be allowed to source additional electricity “on a competitive basis”, which in his terms included gas.

“It’s setting that 100 per cent mandate for new additional investment into the system, we think actually precludes more commercial outcome possibilities,” Janetzki said on Wednesday, on stage at the Australian Clean Energy Summit with New South Wales (NSW) energy minister Penny Sharpe.

“Very supportive if wind and solar solutions can stack up and it’s commercial, absolutely, but we don’t want to preclude other generation options from supporting data centre growth through the state.”

The situation is very different in NSW, where treasurer Daniel Mookhey famously said two months ago that renewables and data centres are keeping the state out of recession.

Sharpe says NSW will have a data centre strategy finished “very soon,” but made it clear they want the two sectors to continue to work in tandem to both flatten demand peaks and troughs and continue to provide the investment that is keeping the state financially afloat.

“The New South Wales vision is pretty clear. We think data centres can also help us with the rollout of renewable energy,” she said.

“We know that we’ve got issues around financing some of those projects that we need, particularly wind. And for us, we think that the possibility of really flattening the curve, dealing with minimum demand-that there’s a role that data centres can play that actually is mutually beneficial.

“I hope that once we’ve finalised our strategy, which is coming very soon, very soon.

“It’ll be very clear that New South Wales is a great place to invest, we can work together in the renewable sector to actually really work through some of those issues, and we can get the additional power that we need so that we can keep the investment coming into New South Wales.”

Industry backs NSW

The NSW position has the backing of major data centre operators in Australia, with Airtrunk’s Sabooh Whitelaw saying this week that she’d like to see the two sector more closely linked when it comes to planning frameworks, reigning in the destructive possibilities of one and getting the other built.

“The success of one increasingly increasingly depends on the success of the other,” she said yesterday of the digital and energy transitions. 

“We need to be thinking about how we can build from data centre demand, not for it.”

Data centres have emerged as potentially huge energy users in the last year, as transmission companies negotiate over gigawatts worth of connection requests.

And while data centres are much quicker to build than new energy projects — Whitelaw says Airtrunk can take a major data centre through planning and construction in just 24 months — there are also gigawatts of renewable projects that are ready to build and could meet that speedy timeline, with the right offtake contract.

Of the 31 wind projects that have won Capacity Investment Scheme (CIS) backing to date, just four are currently under construction.

And while a spate of solar projects have reached financial investment decision (FID) in the last month, the situation is similar for CIS winners: one is operating, three are under construction, and another 30 remain in development.  

Whitelaw is calling for data centres to be the mechanism that will bring these projects, and others struggling to find offtakers, to the grid. 

“That is where data centers can play a role. Their scale, location, and long-term investment horizons provide a strong demand signal, making it easier to coordinate investment across the energy system rather than responding to the demand after it arrives,” she said at the Australian Clean Energy Summit.

“It means using the scale, location, and timing of the digital demand as an investment signal, it means planning digital and energy infrastructure together, so that one investment creates confidence in the other.”

Squadron Energy chief Rob Wheals is aware of the mismatch between the speed at which data centres and new energy projects can be built, but thinks the appetite from the new digital customer for green energy can mitigate this.

“The government has mandated ‘BYO power’ for data centres – this is a once in a lifetime opportunity to accelerate the transition and generate significant economic growth,” he said in a statement.

He sketched a future where data centres not only underwrite new generation, but also “revitalise” the Large Scale Certificate (LGC) market and drive new investments in hydro and, unusually for a renewable energy company, gas.

Squadron is planning to build two gas peaking plants, one in Dubbo and one in Wollongong.

Data centres a political imperative

While data centres have been operating in Australia for years, the sudden shift in scale resulting from the computing needs of artificial intelligence means they’re now on the radar of communities, and governments.

Massive visible buildings such as NextDC’s 225 megawatt (MW) centre in an inner west suburb of Melbourne court controversy with neighbours. 

And real examples of data centres disconnecting from the grid in times of voltage volatility, sending local energy prices rocketing, and using city-scale volumes of water are unintended consequences that federal and New South Wales governments want to avoid. 

Whitelaw says Airtrunk is fully supportive of government plans to pay upfront for connection costs, underwrite new power and reduce demand when directed to support the grid. 

She also says there is a quid pro quo, in that policy and energy infrastructure developments should be held to enforceable milestones so no one is left coming too early, or too late. 

“Large users like us should be held to clear commitments. The projects serving them should be held to equally clear commitments,” she says.

“Data centers need to provide credible demand forecasts, long-term commitments, connection funding, and flexibility where it genuinely supports the grid, developers, storage providers.

“Network businesses need to provide deliverable projects, competitive economics, and confidence in time of delivery of those projects. 

“Governments need to provide a stable, nationally consistent framework with clear outcomes and durable rules.”

But data centres’ willingness to be the demand necessary to unlock, for example, the 24.5 gigawatts of CIS-backed wind and solar that is still in development, shouldn’t be taken for granted.

Whitelaw says data centres’ need for energy isn’t a blank check for projects that no longer stack up commercially or to pay for transmission overruns.  

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