Australia's ambitious net zero goals are facing a potential roadblock in the form of datacenters, which are voracious consumers of electricity. With a projected tripling of power demand within the next five years, these centers are on track to surpass the energy needs of electric vehicles by 2030.
The Australian Energy Market Operator (Aemo) predicts that datacenters will account for a rapidly increasing share of the National Grid's electricity, reaching 12% by 2050. This rapid growth is expected to significantly impact the electricity consumption of major cities like Sydney and Melbourne. By 2030, datacenters could comprise a substantial portion of the electricity demand in New South Wales and Victoria, where most of these centers are located.
Technology companies, including OpenAI and SunCable, are pushing for Australia to become a data processing and storage hub. However, with over 260 centers already operating and more on the way, experts are raising concerns about the potential impact of this industry's unchecked expansion on the energy transition and climate targets.
The energy consumption of datacenters is equivalent to that of 100,000 households. Banks of servers running 24/7 generate immense heat and require substantial electricity for their operation and cooling. According to Professor Michael Brear, a mechanical engineering professor and director of the Net Zero Australia project at the University of Melbourne, the primary drivers of electricity and water consumption in datacenters are cooling systems, as servers convert electrical energy into heat.
Ketan Joshi, an Oslo-based climate analyst, notes that many technology companies are reporting accelerating power consumption year over year. The intensity of energy use is also increasing across various metrics compared to five years ago. Joshi questions the rationale behind this increased energy consumption, suggesting that it may be driven by the widespread adoption of energy-intensive generative AI systems.
Datacenters are large, inflexible loads on the power grid, increasing reliance on coal and gas generation and diverting resources away from the energy transition. While datacenters often claim to run on clean energy by investing in renewable sources like solar or wind, Joshi points out that there is often a mismatch between their constant grid draw and the generation profile of renewable energy. This can lead to situations where datacenters inadvertently support the dispatch of fossil fuels.
The electricity demands of datacenters are so significant that some companies have even paid to restart mothballed US nuclear power stations and increased demand for gas turbines. In Australia, some developers have proposed installing new gas generators to meet their energy needs. According to Aemo's forecasts, by 2035, datacenters could consume an amount of electricity just shy of the annual consumption of Australia's four aluminum smelters.
Dr. Dylan McConnell, an energy systems researcher at the University of New South Wales, emphasizes that while renewable energy is growing in Australia, it is not yet at the scale required to meet renewable energy and emissions targets. The growth of datacenters will add to this challenge, potentially hindering the country's ability to achieve its emissions objectives and close coal operations on schedules aligned with these targets.
The Climate Change Authority warns that the increasing scale and capacity of datacenters will compound pressure on regional power sources and place additional strain on the renewables buildout. This will undoubtedly impact the overall cost of energy, leading to higher power prices. As McConnell explains, "You need to build a bigger system to serve this load, and that will mean more expensive resources are used."
The federal government, in its national AI plan, has acknowledged the need to expand new energy and cooling technologies for AI systems. Minister for Industry Tim Ayres has pledged that data center investment will include additional investment in renewable energy generation and water sustainability. However, with the outlook for AI still uncertain, the full extent of the impact of datacenters on Australia's energy landscape remains to be seen.
