Will data centres save the wind industry or kill our climate targets? Or could they do both?

Will data centres save the Australian renewable sector? Or will they blow the country’s renewable and climate targets out of the water? It’s a polarising debate, almost as deep as the arguments around social licence, location, and to what extent this so-called AI boom is in fact real.

And the issue is moving at a frightening pace. Project announcements are no longer made in the billions, but the tens of billions. Data centre proposals emerge out of nowhere in someone’s backyard. OpenAI admits that one of its off-line models has gone rogue, connected itself to the internet and attacked another company’s data base.

What exactly do we know and understand about this technology? And what will its impacts be on the grid, and on other consumers? Oh, them!

Not much, but governments and some industries are convinced it must be a good thing and are desperate to hitch a ride – the federal government because it fears Australia may be left behind, the renewables industry because it doesn’t see so many buyers knocking on its doors these days.

The federal government has made clear that it wants data centres, but says it also wants them to bring their own renewables to the grid, effectively forcing them to sign deals with new wind, solar and battery projects to power their energy hungry processors.

We are yet to see exactly how it can make that law. It will soon receive advice from the Australian Energy Market Commission, but it is already facing opposition from the usual suspects – the LNP and CLP governments in Queensland and the Northern Territory and the fossil fuel industries and Murdoch media that pull their strings.

Australia’s renewable energy industry has been experiencing something of an investment drought – not because of a lack of projects, or even of capital.

But the major buyers – with the exception of Fortescue, Rio Tinto and a couple of state governments – have gone on an investment strike.

The big utilities assume, based on experience, that if they don’t invest in wind and solar – and no one is forcing them to do so – then state governments will be forced to underwrite the ageing coal generators that can no longer be allowed to close. It’s a strategy that’s worked a treat for the likes of Origin, AGL and EnergyAustralia.

The Clean Energy Council has – unsurprisingly – come out in support of the federal government data centre plan, proposing on Thursday an aligned scheme that forces data centre developers to buy additional firmed renewables (AFR), with an option to buy certificates if these projects can’t be delivered in time.

“We must back new data centre demand with new renewable generation and firming capacity,” it says in a new policy paper. “Failure to do so is a step backward in the energy transition, a missed opportunity for regional communities and a step towards higher power prices.”

But then it adds a caveat.

“The intent is not to require operators to rely exclusively on renewable energy, but to support investment in a firmed renewable energy mix: primarily solar and wind backed by energy storage (BESS, hydro or other forms of renewable storage), contracted via the AFR.”

Give them an inch, and they will take a lot more.

Some data centre owners are trying to be seen to be doing the right thing. Iren announced plans for an 800 MW data centre in South Australia – chosen because it will be by then 100 per cent “net” renewables, and that it will write some new contracts to ensure that it stays that way.

It has been followed by  Firmus Technologies, which has inked a landmark long-term power purchase deal that will supply firmed electricity for its South Australia data centre plans while also underpinning the development of a much needed four-hour big battery.

It aims for at least 2.7 gigawatts (GW) of combined capacity across its Tailem Bend and Stirling North projects, in South Australia.

In Western Australia, iron ore billionaire and green energy evangelist Andrew Forrest wants to sell renewable power to data centre operators from his company Fortescue’s green grid in the Pilbara. There is talk that Bill Gates has been to visit. Mike Cannon-Brookes’ vast SunCable is another reportedly having such talks.

Others are not so interested. One data centre developer in NSW is proposing a massive gas fired generator to power its proposed facility in the southern tablelands, but the biggest proposed data centre carbon bomb comes from the Northern Territory.

The CLP government there is celebrating a proposal to build a $40 billion data centre precinct, with 2 GW of demand, in a state with maximum demand of around 140 MW in its main grid. It would be powered largely by gas generators using the fracked fossil fuel from the controversial Beetaloo Basin.

The Queensland LNP government, which has already ripped up the state’s renewable targets and vows to ensure it remains the country’s most coal dependent state, has already indicated it won’t support the federal move to force data centres to BYO wind and solar.

It would much rather they support their fossil fuel ambitions, and it only has to look at developments overseas to observe how this is playing out.

US energy giant GE Vernova has just reported a big surge in demand for gas turbines, driven largely by data centre demand.

It is producing 25 GW of them a year, and hopes to ramp that up to 30 GW by 2030. It’s a wind turbine manufacturer too, and a supplier to Andrew Forrest’s Squadron Energy, but it says orders for these have fallen 40 per cent.

Wartsila, the Finnish based supplier to Australia’s biggest battery project at Eraring, and a number of others including Woreen in Victoria, has reported a big surge in demand for its reciprocating engines, also for data centres. Battery orders have dried up and margins are so low it’s put that business into a new joint venture.

Equinor, the former Norwegian energy giant known as Statoil, has consolidated its renewable and gas and storage assets under one roof to meet AI and data centre demand. Which sounds like it that might be a good thing, but the company has also ripped up its own renewable commitments, ostensibly due to low demand,

The Australian Energy Market Operator has just filed a new rule request that seeks visibility, and some guard rails, over how new loads such as data centres operate in the grid.

Its fear – based on US experience – is that data centres will go rogue, suddenly eliminating demand (up to a gigawatt in some notorious cases) because of a perceived threat that forces them into self-protection mode.

AEMO wants to stomp on that idea before it becomes a thing. And they also figure that, if some of these data centres are going to surround themselves with diesel gen-sets in case of an emergency, then maybe that can also be used as a grid asset, rather than a potential liability.

“If we had gigawatts of load suddenly switching off to protect themselves … that would be a very problematic situation for us to be able to deal with in the power system,” AEMO’s head of system design Nicola Falcon said in an interview with Renew Economy’s latest Energy Insiders podcast.

AEMO has noted that while there has been a huge amount of data centre enquiry for connections to the grid, a lot have not followed through. Those that have are likely to expand slowly, and some may be able to actively support the grid, either voluntarily or because they have to.

In the end, renenewable energy developers say that while data centres may seem like so many knights in shining AI armour, in terms of contracts, the best thing the government could do is just put firm timelines down around the closure dates of fossil fuel generators, and coal plants in particular.

It’s not a new call, and the benefits of it are being seen in Western Australia, where the state government has taken notice its own coal closure dates and is busily writing contracts for new wind farms and big batteries, as well as solar hybrids.

It was an issue highlighted, too, by the NSW Net Zero Commission, which points out how the country’s biggest economy is falling behind on its own emissions trajectory.

What should the state government be doing? “Ensuring new industrial loads, especially data centres, rely on additional renewable energy sources and support the timely closure of coal power stations,” it said.

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