Gas-powered AI could push up bills by 26 per cent without strict rules and focus on renewables

Urgent action must be taken to regulate power and water used by data centres to avoid burdening Australian households with higher costs, a study has found.

The race to build data centres in Australia could force household electricity prices up by as much as 26 per cent within a decade, a study has found.  The artificial intelligence hubs could also use as much electricity as all homes in the state of Victoria by 2030. 

The Climate Council issued the warnings on Wednesday in a report into the growing tech industry that has established 162 data centres across Australia, with another 90 planned. 

The forecast comes less than a week after a NSW inquiry into the sector heard calls for a data centre coordinator, and following Greenpeace’s request for a moratorium on approvals so standards could be developed. 

Data centres are booming in Australia as technology firms such as Microsoft, Amazon, AirTrunk and NextDC strive to meet demand for AI technology. 

But the council’s report, called Clouded Future, found their electricity use had nearly doubled in Victoria over the past year and had risen 18 per cent in NSW. 

If data centre growth continued without renewable energy requirements, and instead relied on gas, they could triple their energy and water use by 2030. 

By 2035, the increased demand could raise wholesale power prices in NSW by up to 26 per cent and in Victoria by 23 per cent, the study found, while energy bill in South Australia and Tasmania would also be impacted. 

Governments should urgently introduce strict rules for data centres to avoid these price hikes, Climate Council chief executive Amanda McKenzie said.

”Out-of-control construction of data centres would hit Australians in the hip pocket,” she said. 

”Governments must proactively manage the surging demand, making sure that they are powered with clean, renewable power.”

The report issued seven recommendations for data centre rules, including attaining 100 per cent renewable power generation within three years of operation, water efficiency standards, renewable energy backup such as batteries, and greater transparency about water and energy use. 

Some developers were already planning to use renewable energy and recycled water in projects, Griffith University associate professor Joel Gilmore said, but all centres should be required to boost environmental standards.

”There needs to be not just voluntary action but enforceable regulations from government to ensure there is a level playing field,” he told AAP. 

If tech firms did not address potential energy risks now, Assoc Prof Gilmore said, Australia could suffer the consequences for years. 

”We’re seeing in other countries around the world where data centres have gone in unregulated, causing higher prices, taking significant amounts of water from the local community,” he said. 

”When we’re talking about the potential scale of growth we’re seeing globally and in Australia, we want to get out in front of this now and make sure that we can plan.”

In 2025, Australia attracted the second-highest data centre investment in the world following the US, according to Knight Frank. 

Source: AAP