The Queensland LNP plan for coal-powered data centres could cost taxpayers $20 billion a pop

Over the next decade Australian data centres are forecast to add an extra amount of power demand – 29 terawatt-hours (TWh) – that is equal to the transmission grid demand of South Australian and Western Australia combined.

If we fail to ensure data centres pay for new renewable energy and battery power plants to cover this surge in demand, then power prices will increase for all of us. Or taxpayers could find themselves lumped with a $20 billion bill by Queensland LNP Premier Crisafulli to fund new coal power stations for each AI company’s mega data centre.

In the US state of Virginia, which is the global capital of data centre development, the Joint Legislative Audit and Review Commission warned in 2024 that, “Data centers’ increased energy demand will likely increase system costs for all customers, including non-data center customers, for several reasons.” 

The first reason they explained was because, “A large amount of new generation and transmission will need to be built that would not otherwise be built, creating fixed costs that utilities will need to recover.”

The second reason was that, “it will be difficult to supply enough energy to keep pace with growing data center demand, so energy prices are likely to increase for all customers.”

Around the time that report was issued, the main utility for Virginia, Dominion Energy, announced that residential electricity bills would need to double over the period of 2025 to 2039, even though most of the extra cost was driven by extra electricity demand from data centres.

In Australia we are in the fortunate position that we have more than enough renewable energy projects in development to cover expected growth in data centre electricity consumption. 

The Australian Renewable Energy Scorecard shows that we have 46,000 megawatts of proposed renewable energy projects with government approvals already in place. These would be capable of generating around 85 terrawatt-hours of electricity – almost three times the electricity growth expected from data centres.

There are also 23,600 megawatts of battery projects with their government approvals in place, which substantially exceeds the peak demand of expected future data centre development.

Data centres have plenty of companies happy to build them power plants, provided the data centres sign onto a long term contract.

We are also fortunate that both the federal government and NSW government are looking to apply requirements on data centre operators to ensure they contract new renewable energy power supply to cover their electricity demand. 

Is the Liberal-National coalition worried about protecting energy consumers?

Unfortunately, the Liberal and National Party Coalition do not seem to be taking the risks posed to other energy consumers from data centres seriously. 

Federal Shadow Energy Minister Dan Tehan, when asked by the ABC Radio’s AM program whether he supported the government requirements on data centres, said that instead,  “This should be a matter for developers [of data centres].” 

This resistance to legislated obligations on data centres seems to stem from a deep-seated mistrust of renewable energy amongst Liberal and National MPs. So what alternatives do they have in mind?

Will it be nuclear – how long are you willing to wait?

Tehan has suggested that instead data centres could use nuclear. Yet the last nuclear reactor built in the United States (Vogtle) took over ten years to build and another one – Virgil C Summer – took so long and was so over budget it was cancelled.

In France their last reactor, Flamanville 3, took 17 years to build.  Meanwhile in the UK the last nuclear reactor they committed to build in 2016 isn’t expected to be complete until 2030 (Hinkley Point C). 

So can Tehan explain what will happen to our electricity bills in the interim period, while data centre power demand goes up and we wait for nuclear reactors to be built?

Also worth mentioning is all of these nuclear power stations mentioned above were horribly expensive. Nuclear is vastly more expensive sources of electricity than renewable energy. So in reality, talk of nuclear powering data centres is just a ruse for them to avoid taking actions to address the immediate problems they will impose on other energy consumers.

What about gas – where will it come from?

If we were to rely on gas to power data centres then this could make a bad situation for gas consumers even worse.  Both the Australian Competition and Consumer Commission and the Australian Energy Market Operator have repeatedly warned us the east coast gas market is facing shortages of gas in the next few years. 

In order to supply data centres with 29 terrawatt-hour of power from gas turbines would require over 250 petajoules per year of additional gas (assuming they were like the gas power plant the Queensland Government is building nearby to Anthropic’s Dalby Data Centre).

This is half of the Australian east coast market’s current entire gas demand – so where is this gas going to come from, given the market is already short of gas? 

Liberal and National Party MPs have been keen to talk up the Beetaloo Basin, yet none of the companies operating in the basin have booked any proven or probable gas reserves.

The  gas production the NT Government has underwritten is just 24 petajoules per year, although it’s not clear whether this will even be delivered, given the supply is from “pilot projects”. 

 The only option that we could be confident to deliver the scale of extra gas required on the timeframe needed would be to force the big three Queensland liquified gas producers to divert production from Asian customers to the domestic market. Yet the Liberal-National Coalition have ruled this out.

It could be coal – which means taxpayers could be on the hook for $20 billion per AI mega data centre

Lastly, the Queensland Premier has recently indicated he is considering building coal power plants to supply data centres. This puts Queensland taxpayers on the hook for a very large bill to help out data centres.

To cover the two, 160 megawatt peak power requirements of just the single Anthropic Dalby data centre with a coal power plant would require Queensland taxpayers to stump up $15 billion on a new coal fired power station (using CSIRO cost estimates). 

Has Crisafulli secured a legally binding commitment from Anthropic or the Singaporean developer of the data centre – Zerra DC – to cover such an expense if it turns out that demand for AI doesn’t turn out the way they hope?

Other Australians will also bear the bill to offset the carbon emissions that Anthropic and Zerra DC appear to be trying to avoid. The Dalby Data Centre, if it was powered by coal, would likely lead to 151m tonnes of CO2 emissions over a 20-year lifetime. At the current Australian Carbon Credit Price of $38 this will impose a bill on Australian taxpayers of $5.7 billion.

Data centre developers and the large tech companies that use them, are in a screaming hurry to cash-in on AI stock market gold rush that is unlikely to last long. They are following their standard play to move fast and not worry too much about breaking things along the way. 

Our politicians need to make sure that, in their rush, they don’t break things at our expense. 

Tristan Edis is the Chief Executive of Green Energy Markets. Green Energy Markets assists clients to make better informed investment, trading and policy decisions in energy and carbon abatement markets.