A surge in Australian data centre construction driven by artificial intelligence (AI) use risks pushing up power bills and climate pollution, according to a new report from the Climate Council.
The report, Clouded future: Managing risks of the data centre boom, says Australia is a global investment hot spot, second only to the USA in 2024, with 162 data centres in operation and more than 90 projects in the pipeline.
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Unchecked, this growth risks:
- 26% wholesale electricity price rise in NSW, and 23% rise in Victoria by 2035 if data centre demand is met with gas rather than renewables
- 14% more climate pollution from Australia’s main electricity grid by 2035 without intervention
- three times the projected growth in data centre energy demand by 2030—making their power use equivalent to all Victorian homes
- three times the projected growth in water demand by 2030. Water utilities have received single site connection requests to be able to use up to 40 million litres a day (equivalent to 16 Olympic-size swimming pools).
The Climate Council says proactive, swift government action can better align data centre growth with Australia’s switch to clean, reliable, and affordable energy.
Climate Council CEO Amanda McKenzie says, “Australia is navigating a dual boom: a critical switch to a clean energy system and a historic surge in digital infrastructure. To protect the Australia of tomorrow, our governments must act today.
“Data centres are hungry for energy. Governments must proactively manage the surging demand, making sure that they are powered with clean renewable power. If they don’t, there is a big risk that they will push up pollution from coal and gas at a time when we’re already living through more frequent floods, and ferocious fires.
“Unchecked construction of data centres would hit Australians in the hip pocket, too, if their high energy demand is met by expensive and polluting gas rather than additional renewables. But, matching new data centre load with low cost, new renewables and storage will protect households, and other businesses from those costs.
“There is an opportunity to align the expansion in data centres with climate action, and the time for government action is now.”
Climate Councillor and energy expert Associate Professor Joel Gilmore says how the government manages this industry will shape our energy system—and climate—for decades to come.
“Done poorly, data centres threaten to derail our switch to clean energy, which will push up pollution and power prices. With government intervention and enforceable requirements, data centres can play a role in our clean energy shift, support grid reliability, and avoid unnecessary power price rises,” he says.
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“Data centres are like a giant snowball rolling down the mountain. If they don’t bring new, low-cost renewables and storage with them and pay for the energy and water infrastructure upgrades they need, they’ll be dumping massive costs onto households and businesses.”
