Data Centre Boom Strains Australian Power Grid, Threatens Price Hikes

The rapid growth of data centres in Australia is straining the electricity grid and could lead to higher power prices, according to energy experts.

Soaring demand for data centres: Australia is a top hub for data centres globally, with 214 facilities nationwide. The explosive growth of cloud computing and AI is expected to drive exponential expansion in the coming years:

• One large data centre can consume as much electricity as 50,000 homes. Data centres currently use an estimated 5% of Australia’s grid power, projected to rise to 8-15% by 2030.
• David Dzienciol of data centre operator NEXTDC believes electricity demand could “skyrocket” over the next decade due to advancements in AI and accelerated computing.

Strained electricity grid and price pressures: As Australia electrifies with more electric vehicles and households ditching gas, data centres present an additional challenge in an already stressed power grid:

• Prof. Bruce Mountain of the Victoria Energy Policy Centre says rising data centre demand makes the energy transition harder by requiring both replacement of coal power and building new capacity. He sees it becoming a serious issue if growth continues at the current rate.
• Tony Wood of the Grattan Institute warns that adding significant data centre demand without boosting supply will increase electricity prices. He urges governments to act now to get ahead of the problem.

Clean power solutions: To meet surging demand, data centre operators are exploring renewable energy options and strategic site locations:

• Origin Energy, which powers one-third of Australian data centres, is looking at on-site wind, solar, storage and backup generation combined with grid power.
• Locating data centres in regional areas can enable co-location with new renewable energy projects, according to Origin’s James Magill. Annual growth forecasts for their data centre customers range from 10-30%.

Broader implications for Australia’s energy future: The rapid rise of power-hungry data centres underscores the challenges ahead in Australia’s transition to a clean energy economy. Policymakers will need to proactively manage both the supply and demand sides of the electricity market to keep prices stable while achieving emissions reduction goals. Creative solutions like pairing data centres directly with renewable generation offer a glimpse of the integrated approaches that may be required. As digitization accelerates, a comprehensive strategy to power data infrastructure sustainably and cost-effectively will only become more critical.