Data Centres Could Add $40bn to Australian Power Costs, Study Warns

Power bills across Australia's east coast would climb by hundreds of dollars per household if 5 gigawatts (GW) of data centres connected to the existing grid without bringing new generation with them. That is the finding of a new analysis from the Smart Energy Council (SEC), a report titled "$40 billion hike".

The SEC modelled what might happen if data centres were allowed to "build first, catch up later". The Australian Energy Market Commission (AEMC) has put forward that approach as one recommendation. Under the 5 GW test scenario, wholesale power prices would rise by $40 billion across Queensland, New South Wales, Victoria and South Australia between 2029 and 2035.

About $37 billion of that would land on other customers through their power bills. The extra demand would let more expensive gas power fill the gaps while renewable generation catches up. The SEC says the cost of that lag should be carried by the data centres.

Queensland hit hardest

Queensland fares worst in the SEC's scenario because the state plans to financially support new gas and coal stations, and possibly data centres too. SEC chief David McElrea criticised "carve-outs and special passes" to rely on coal-fired generation, naming the Queensland government's coal-fired computing ambitions. He said Australians in a cost-of-living crisis cannot be expected to foot the bill for tech companies and AI infrastructure.

A new coal power station built for a single data centre could cost taxpayers between $15 billion and $20 billion, according to an analysis by Green Energy Markets.

The SEC quotes work by the Clean Energy Finance Corporation and Baringa. It found that without matching new supply, New South Wales wholesale prices would be 26 per cent higher in 2035. Where renewables and storage are added alongside the load, they would be 3 per cent higher.

Legislation expected

Prime Minister Anthony Albanese promised to make bringing their own renewables a legal obligation for data centres, then promised carve-outs for states that want to use gas. On Monday, industry minister Tim Ayres told a Senate Estimates hearing the government will introduce the legislation "shortly". He said it would use national rules so the investments do not push up electricity prices, and would require data centres to procure new renewable generation.

The SEC wants a strong mandate and binding connection conditions so that the data centre, not other customers, carries the cost of any lag.

At the end of June, the Australian Energy Market Operator had 17 data centre projects with 9 GW of capacity in its connection queue, and five of them (1.4 GW) were being implemented. The SEC calls its 5 GW figure a "credible stress test scenario". The queue does not include projects such as the 2.16 GW Zerra facility in Queensland or Quinbrook's 800 MW Supernode.

Connecting is proving harder than expected. Transgrid says Western Sydney has no room left for new data centres. In Melbourne, delays in getting grid capacity to NextDC's M3 data centre in Footscray ended the tenure of chairman Douglas Flynn and cost CEO Craig Scroggie millions of dollars in future bonuses.

Source: Smart Energy Council