Wind and solar project developers have been eyeing data centres as a potential solution to the grid constraints that have emerged as a barrier to their projects, but one data company says they may not the solution to Australia’s transmission problems.
Transmission company Ausnet says it has received load enquiries for more than 8 GW of data centre capacity, some of them proposing loads bigger than the country’s aluminium smelters, the current largest energy users in Australia.
But the data centre companies don’t seem willing to site their projects in the middle of renewable energy zones, as some in the wind and solar industry hope.
Next DC’s head of energy Shayne Kumar says state and federal policy makers, and developers, are asking “almost on a weekly basis” whether the heavy electricity users can be homed in renewable energy zones (REZs).
He admits it looks like an elegant solution to reducing economic curtailment, grid congestion, and marginal loss factors while radically expanding how much generation can be loaded into an area.
But like electric cars, which consumers want to use as cars while energy insiders want to turn into grid stabilisers via vehicle-to-grid charging, using data centres as pseudo-energy market players is a trade off the owners are unwilling to take.
“Look at what a data centre is,” Kumar told the CEDA Climate and Energy Summit last week.
“It’s a backbone for our modern economy, and everyone hates to wait for that spinning wheel that comes up when you are loading Netflix or YouTube. It’s just the worst. And when it’s doing that, it’s going through a data center.
“We can’t have data centres in renewable energy zones simply because we need them closer to cities, because we don’t want to wait for that spinning wheel.”
That is a message Quinbrook Infrastructure Partners has already heard. It plans to build an 800 megawatt (MW), 2000 megawatt-hour (MWh) battery energy storage system (BESS) to support a $2.5 billion data storage centre close to Brisbane.
Kumar did throw developers and policymakers a bone however, saying that where data centres can help is managing minimum demand during the day and avoid the duck curve caused by huge amounts of solar hitting the grid around midday.
“If we can get the right mix between planning environmental approvals and with our customers, we could unlock behind the meter generation at data centers in the form of backup diesel generators,” he said.
Huge demand coming
It’s easy to see why developers and policymakers would like the energy-intense sector to do some legwork in stabilising the grid.
About 1.5 per cent of electricity in the National Energy Market (NEM) currently feeds data centre demands, Kumar says, and the Australian Energy Market Operator (AEMO) estimates that will rise to more than 5 per cent by 2033-34 in its Electricity Statement of Opportunities (ESOO) 2024.
As of April, transmission company Ausnet had a pipeline of data centre connection requests worth 8 gigawatts (GW), says the company’s head of transmission Elizabeth Ryan.
“We’re also seeing increasing development in data centres. Ausnet just connected the first transmission level data centre in Australia, and we have a really significant pipeline of qualified data centre inquiries,” Ryan told the CEDA Climate and Energy Summit last week.
“And we know that other distribution networks also have more.”
Some of those loads are bigger than the largest existing load on the Victorian network, the Alcoa Portland smelter (about 600MW). Active data centres are now pushing demand across Ausnet’s transmission network to now occasionally touch the network’s maximum limit of 10GW during short periods for a few days each year, the company told Renew Economy.
But not all will be connected. And those which are, typically increase energy consumption by 50-100MW per year until the mid-2030s, rather than enter with their maximum allowed energy needs on day one.
In order to bring these loads in, for genuine requests Ausnet must figure out where the best locations will be on its network and build out any extra infrastructure — or require the data centre to — accordingly.
That’s a scenario that is playing out across the NEM: about 1.3GW of data centres have connected but are only drawing 340MW of energy from the grid, according to the 2024 ESOO.
Predictions of an energy-scarce world
While decarbonisation is one facet of data centre planning, energy price and security means operators won’t be loyal to a renewable ideology.
“[Australia is] going to run out of power for data centres eventually,” Kumar said.
“The way that we could do that is keeping all the options on the table, whether that’s green hydrogen, whether that’s considering small modular nuclear reactors in the future.
“Not siding with the Coalition here or any government partisan scheme. It’s just thinking about this pragmatically. Sometimes we’re a bit narrow-minded where we think batteries, solar and wind will fix everything, but no, they won’t.”
But while the data centre industry holds the whip hand now, electricity and land scarcity means future data centres may one day have to relocate to where the generation is.
Locations such as the south-west REZ in New South Wales (NSW), where EnergyCo was forced to cull projects winning access rights to just four because not enough transmission is available, could be very attractive in future.
California-based Fereidoon Sioshansi wrote in Renew Economy in December that as city locations disappear data centre operators will be edged further out.
Already Engie is reportedly trying to secure a data centre operator for its proposed 1.9GW The Plains Renewable Energy Park in the south-west REZ.
