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Tech giants will be pushed by the Albanese government to build their own renewable energy sources to power the electricity-hungry data centres built in Australia to fuel the artificial intelligence boom.
Data centres – huge facilities that store computers used for AI and cloud storage – are central to the federal government’s new AI policy, which shuns heavy regulations initially sought by unions in favour of a laissez-faire model as Labor aims to drive up the moribund productivity rate.
Minister for Industry and Innovation and Minister for Science Tim Ayres.Credit: Alex Ellinghausen
The National AI plan, as forecast by this masthead in August, will not include any new laws to regulate the burgeoning technology, even as Australia readies to enforce the world’s first social media ban for children with heavy fines for corporations that don’t comply.
Instead, a $30 million safety institute will be created to advise on the need for new laws on a case by case basis after Treasurer Jim Chalmers and others inside the government pushed against any clampdown on an AI boom the Productivity Commission estimates will be worth $200 billion over a decade.
“This plan is focused on capturing the economic opportunities of AI, sharing the benefits broadly, and keeping Australians safe as technology evolves,” Industry Minister Tim Ayres said, risking a backlash from safety advocates worried that AI will cause the same sort of social harm as social media did before government started to clamp down on big tech.
“AI will help close gaps in essential services, improve education and employment outcomes, and create well-paid jobs.”
Data centres require large amounts of power to process information used in artificial intelligence.Credit: Getty Images
Nations across the world are in a race to secure data centres as they aim for technological and geopolitical ascendancy, even as communities have pushed back against how much power and water they use.
A report from Knight Frank, a real estate consultancy, found Australia ranked second globally for data centre investment in 2024. A doubling in investment in data centres in the September quarter spurred the largest increase in business investment in four years, highlighting the role the facilities could play in lifting national output.
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But the data centres draw on a massive amount of energy to fuel the computer banks and water for stabilising temperatures. The energy market operator said in August that data centres could require 12 per cent of the energy produced by the national grid in 2050. They currently use 3 per cent.
Australia’s transitioning grid is already under severe strain, so Labor’s cabinet is mulling options to pressure tech firms such as Amazon and Microsoft to tie local investment in data centres with corresponding investment in renewables, according to sources unwilling to speak publicly until plans are finalised. The government wants the firms to underwrite big wind and solar projects or build their own batteries on-site.
A senior government source said many firms building data centres were also investing in energy, but the ventures needed major project status to streamline approvals.
“Our expectation is many of these projects will bring additional power into the grid,” they said.
Labor is keen to speed up the energy transition to meet its climate targets, but the rollout of renewables has been delayed by red tape, local protests and financial constraints.
The Climate Change Authority cited the huge energy demands of data centres as a key risk when it recommended a 62 to 70 per cent cut in emissions by 2035. That range was adopted by Climate Change and Energy Minister Chris Bowen, who the opposition has labelled a part-time minister after he took on the role of COP climate summit negotiation president despite losing hosting rights to Turkey.
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The authority’s chair, former NSW Liberal government treasurer Matt Kean, said tech firms should build their own batteries and other generation and storage facilities. “This is what households are doing to get the lowest cost electricity available,” he told this masthead.
Part of the reason the government wants tech giants to create their own energy sources is because other nations with strained electricity and water resources have seen a backlash against the construction of data centres, similar to the resistance to wind farms.
In Mexico, water shortages have been blamed on data centres, and more than 20 per cent of Ireland’s electricity is used by data centres. South Africa’s energy grid, which routinely blacks out, is being further stretched by data centres, and similar concerns have been raised in Britain, India, Netherlands and Spain, according to a New York Times investigation.
More than 15 data centres worth $97 billion have been blocked or delayed in the US in recent years.
At least 16 data centre projects, worth a combined $64 billion, have been blocked or delayed as opposition mounts to the developments, according to a new study by Data Centre Watch, a grassroots group that tracks development of data centres.
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