Department of Energy seeks solutions as data centre boom challenges renewable-centered grid
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The news: The Department of Climate Change, Energy, the Environment and Water is working through the implications of an AI-driven boom in data centres for the energy grid, raising both "challenges" and "opportunities" in a new document released under freedom of information laws.
The numbers: AEMO estimates the electricity consumed in the national electricity market by data centre is currently 2% of grid demand. This is expected to rise to 6% by 2029-30 and 12% by 2049-50.
There are about 260 data centres operating in Australia and deployable capacity is expected to double by 2030.
The briefing notes that data centres may be able to provide some demand flexibility, including during peak periods, but the “extent of flexibility varies by different types of data centres”.
In March 2025, the Energy and Climate Change Ministerial Council agreed to work with energy market bodies on the implications for energy systems. The departmental brief notes that by the end of 2025, advice for ministers would have been finalised following consultation with stakeholders and investigating options to minimise system impacts and maximise benefits. This included exploring “whether existing regulatory frameworks for data centres remain appropriate”.
According to the departmental notes, Australian Energy Market Operator is progressing “a range of reform initiatives in relation to data centre connection issues, including reviewing registration exemption conditions for data centre back-up generation”.
The context: In a back-pocket briefing document, released under FOI, the department outlines the expected surge in data centres over the next few years and the growing energy needs.
The briefing notes that data centres supporting the roll-out of renewables, such as via behind-the-meter batteries or power purchasing agreements to support more generation and storage, could help with energy efficiency improvements and demand flexibility. This could, in turn, help manage the surge in data centre energy demand.
What they said: "Data centres require continuous energy supply and generally prefer to draw a consistent load from the grid. This needs to be balanced with the variable nature of renewable energy. Increased demand from data centres presents both opportunities and challenges for a renewables-dominated grid," the briefing explains.
"Data centres increase minimum demand, soaking up excess solar during the middle of the day," it says.
"While data centres deliver significant benefits, they are increasing electricity demand and present challenges for the grid."
It also raises the potential for AI to help improve energy use: "AI can help optimise energy management, enhance grid stability, and mitigate cybersecurity risks."
