Australia is seeking to attract billions of dollars in investment from global technology companies developing artificial intelligence infrastructure while ensuring that the rapid expansion of energy-intensive data centres does not undermine its renewable energy transition or drive up electricity prices.
The challenge is becoming increasingly urgent as major technology companies, including US-based AI developer Anthropic, look to expand their presence in Australia, where demand for electricity, water and supporting infrastructure is growing alongside the digital economy.
Australian Climate and Energy Minister Chris Bowen said the government welcomed data centre investment but expected companies to contribute to the energy supply needed to operate their facilities, particularly through renewable electricity.
“Sometimes a data centre is quicker to build than a wind farm,” Bowen said. He stressed the importance of coordinating the development of energy infrastructure with the growing pipeline of data centre projects to ensure that investment serves Australia’s national interests.
Bowen is preparing to play a central role in the United Nations climate negotiations beginning Monday, November 9, in Antalya, Turkey. The discussions are taking place against a backdrop of rapidly increasing global electricity consumption, driven partly by artificial intelligence, data centres, industrial activity and rising cooling requirements.
Australia is preparing draft legislation to manage the growing energy demands of data centres. The proposed framework is expected to encourage operators to invest in additional renewable electricity generation, disclose their water consumption and manage electricity demand during periods of peak consumption.
Bowen said companies seeking to establish large data centres in Australia should effectively bring their own energy supply, prioritising the cheapest available renewable sources.
“That means bringing your own energy, and it means bringing your own cheapest form of energy, which is renewable energy,” he said.
However, the government does not intend to completely exclude natural gas from the electricity system. Bowen said gas could continue to provide backup generation when renewable sources and battery storage are insufficient to meet demand.
“Our approach is that gas can play a role in peaking and firming,” he said, explaining that gas-fired generation might only be required for a limited number of days each year.
Australia has been expanding its renewable energy and battery storage capacity as part of its broader transition away from fossil fuels. Bowen noted that the country has become the world’s third-largest market for utility-scale batteries, behind China and the United States.
Large batteries store electricity generated by solar and wind farms during periods of high production and release it when demand rises, particularly during the evening. This reduces the need to operate gas-fired power stations and could eventually provide a model for meeting the electricity requirements of data centres.
Australia already has more than 160 operational data centres, while at least 225 additional projects have been proposed, according to the Australian Energy Market Operator.
Anthropic recently signed its first Australian agreement as part of a proposed $32 billion data centre development in Queensland. The Australian Broadcasting Corporation reported that the facility could consume enough electricity to power approximately 1.5 million homes, highlighting the potential scale of energy demand associated with the artificial intelligence industry.
The rapid expansion is raising concerns about whether Australia’s electricity infrastructure and renewable energy development can keep pace with technology investment. Data centres can be constructed relatively quickly, while wind farms, transmission networks and other energy infrastructure often require lengthy planning, approval and construction processes.
The issue is not limited to Australia. In the United States, electricity grid constraints and lengthy connection queues have encouraged some data centre developers to install their own natural gas turbines. Such arrangements allow facilities to secure electricity independently but risk increasing greenhouse gas emissions.
Across the world, communities and policymakers are increasingly questioning the environmental costs of large data centres, particularly their electricity consumption, water requirements and impact on local infrastructure.
Australia is also facing political pressure over the expansion of these facilities. Some lawmakers have warned that rapid development could place additional pressure on electricity and water supplies while diverting skilled workers from other industries.
Other countries are adopting stricter requirements. Ireland and Spain have introduced measures linking data centre development to clean electricity supplies, while Ireland has also sought financial contributions from operators towards new energy infrastructure. Singapore has introduced legislation to penalise companies that fail to meet their clean energy commitments.
Australia is considering similar measures through its proposed regulatory framework. Public consultation is expected to examine requirements for renewable electricity investment, water-use reporting and demand management during periods of peak electricity consumption.
The issue is likely to feature in broader discussions surrounding the global energy transition, although data centre electricity consumption is not formally included on the agenda of the Antalya climate negotiations.
More than 190 countries are expected to participate in the talks, which will focus on international cooperation and measures to address climate change.
Bowen said the growing electricity requirements of artificial intelligence and digital infrastructure would nevertheless attract attention from participating ministers.
He argued that the expansion of data centres did not change the fundamental priorities of climate policy: increasing renewable energy generation and electrifying sectors where possible.
“It will be one of the things that ministers want to talk about,” Bowen said. “But I don’t think it changes the fundamental dynamics that we need to get more renewable energy up … and we need to electrify those things that can be electrified.”
