Data centre boom could send power prices 26 per cent higher: Climate group

Australia’s data centre boom risks driving up the cost of electricity and derailing emissions targets unless governments force operators and their global tech customers to directly fund new renewable energy projects, climate advocates warn.

A new report from the Climate Council, Clouded future: Managing risks of the data centre boom, lands as Australia jostles to become one of the world’s hottest destinations for data centre investment, currently sitting second only to the United States. The country is home to at least 162 operational data centres, with about 90 more in the pipeline, driven largely by the surge in artificial intelligence.

That growth carries a heavy energy cost, with data centres using about 2 per cent of electricity in the east-coast grid in 2025, a number that is expected to triple by 2030 – roughly equal to the electricity needs of every home in Victoria – according to the Australian Energy Market Operator.

The sector’s demand has nearly doubled in Victoria over the past year and risen 18 per cent in NSW.

Without urgent intervention to ensure demand is matched by more renewables, the Climate Council said, wholesale electricity costs in parts of eastern Australia could potentially rise by up to 26 per cent by 2035.

“If we add more demand without building more supply, prices will rise,” Climate Council energy expert and Griffith University associate professor Joel Gilmore said. “Unchecked data centre growth risks reversing the progress renewables have made in reducing prices. The last thing we need is to be forced to rely on more expensive fossil fuels.”

However, the projection of a 26 per cent jump is based on the unlikely scenario in which new data centres are aggressively rolled out without any uplift in renewable generation and storage above baseline forecasts to cater for them, therefore requiring coal-fired power plant closure delays and a major ramp-up of gas-powered output.

Industry leaders point out that many data centre operators have already been striking long-term power purchase agreements with wind, solar and storage projects, while federal and state governments are working on enforceable rules mandating them to invest in enough new renewable capacity to offset their consumption and avoid straining the grid.

Energy ministers from all states, except Queensland, have agreed data centres should invest in additional renewables and firming projects in their state of operation to fully compensate for their power demand, and are due to decide on the new rules at a meeting in July. “If data centres want to benefit from Aust