Our online lives are increasingly dependent on digital data, whether it’s asking questions of an AI chatbot, making a video or transcribing an online meeting.
Datacenters – huge warehouses filled with servers to process and store all that data – have existed for decades. But what is changing is the rapid pace and scale of industry development due to artificial intelligence.
Technology companies are pushing to make Australia a hub of data processing and storage. But with 260 datacentres operating – mostly in Sydney and Melbourne – and dozens more to come, concerns are also growing about the impact on power and water resources.
What has this week said about datacenters in the US and Australia?
In the US, President Donald Trump announced a “ratepayer protection pledge” that would require tech companies to cover their electricity needs.
“Many Americans are also concerned that energy demand from AI datacenters could unfairly increase their electric utility bills,” he said. “They can build their own power plants as part of their factory, so nobody’s prices go up.”
In Australia, Energy Minister Chris Bowen acknowledged that “datacenters are big energy users”, adding that the issue would be addressed in an upcoming AI and datacenter strategy.
“People who are building datacenters need to create new energy to go with it, and that energy will be renewable. But we also want to make sure that there is flexibility and redundancy built into the energy use.”
A coalition of energy and environmental groups including the Clean Energy Council, the Electrical Trades Union, the Australian Conservation Foundation and Climate Energy Finance proposed a set of “public interest principles for datacentres” that include investing in new renewable energy and using water responsibly.
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“If you want to build a datacenter, you have to build in renewable energy and water recycling to power it,” said Adam Bandt, chief executive of ACF. “Big tech corporations should be forced to do their fair share so they don’t waste our resources.”
Australian Energy Council says Key policy questions still need to be answered: Will datacenters need to be 100% renewable? And will it be based on total demand, or take into account when the electricity is being used?
Meanwhile, a check The social, environmental and economic impacts of the datacentre boom in NSW will be examined.
Are datacentres a threat to the power supply to Australian homes and businesses?
According to the Australian Energy Market Operator (AEMO), datacenters currently draw about 2% of electricity from the national grid, but this share could triple within five years.
By 2030, Aemo estimates that datacenter energy demand could exceed the electricity used by the country’s electric vehicle fleet. And by 2035, the industry could consume 21.4 terawatt hours of electricity, just less than Australia’s annual consumption. Char Aluminum Smelter.
AGL, one of Australia’s largest electricity companies, Estimate Demand “could exceed AEMO forecasts”.
The energy and water demands of industry are largely related to cooling – either by air conditioning or water – given servers, like other computing devices, convert electrical energy into heat.
The challenge of meeting these growing needs is not unique to Australia. Globally, demand for datacenter power is increasing four times faster compared to all other regions, according to the International Energy Agency. Centers are growing and growing in number, with hyperscale facilities becoming more common.
According to the IEA: “A hyperscale, AI-centric datacenter could have a capacity of 100MW or more, consuming as much electricity as 100,000 homes annually.”
Will datacenter growth affect electricity prices?
Dr Dylan McConnell, an energy systems researcher at the University of NSW, says there will be an undeniable impact on the overall cost of electricity, which will impact electricity prices. “You need to build a larger system to meet this load, and that will mean using more expensive resources.”
A report This has been found by Baringa Advisors for the Clean Energy Finance Corporation (CEFC) By 2035, Datacentre growth could increase wholesale electricity prices by 26% in NSW and 23% in Victoria, driven mainly by the need for more expensive gas peaking generation.
“This dependence not only increases prices, but could also lead to a 14% increase in overall (national electricity market) grid emissions,” the report said.
CEFC’s head of infrastructure, Julia Hinwood, says Australia can avoid these losses “by investing early in renewable energy and storage capacity to power the region”.
Industry group Data Centers Australia says power purchase agreements and onsite solar account for about 70% of the industry’s energy consumption.
“The datacenter industry is one of the largest investors in renewable energy,” says Belinda Dennett, the group’s CEO.
What about Australia’s ability to cut emissions and meet climate targets?
But McConnell says although renewable energy is growing in Australia, the pace is not yet fast enough to meet renewable energy and emissions targets. He says datacenter growth could increase the challenge.
“If we’re in a situation where demand is growing faster than anticipated and renewables are not growing, then really what we’re doing is just meeting that new demand and not displacing coal.”
Australian emission estimates indicate that additional demand on the grid from datacenters contributes to slowing emissions reductions from the power sector after 2035.
Are they a threat to the water supply?
data center australia describes The industry is highlighted as a “minor water user”, and has major opportunities to reduce reliance on drinking water with closed-loop cooling systems and recycled water.
But water officials expect the demand on drinking water supplies to be significant. Datacentre demand in Sydney alone is projected to reach 250 megalitres per day by 2035, roughly equal to the total drinking water of Canberra, while Melbourne Water says development applications for new hyperscale datacentres already exceed the water demand of almost all of the state’s top 30 commercial customers.
