Smart Energy Council puts $40 billion price tag on data centres connecting without new supply

The Smart Energy Council (SEC) says connecting 5 gigawatts of data centre demand to the east coast grid without matching new generation would add $40 billion to wholesale electricity costs across Queensland, New South Wales, Victoria and South Australia between 2029 and 2035. The council describes the 5 GW case as a stress test, based on what the Australian Energy Market Operator already has in its connection queue and on later announcements. The analysis examines a "build first, catch up later" approach, which one Australian Energy Market Commission recommendation has pointed towards.

Households would carry an estimated $9 billion of the total in their bills across the National Electricity Market between 2029-30 and 2034-35, according to the SEC, with commercial users and manufacturers left with most of the remaining $31 billion. RenewEconomy reported a different split, saying about $37 billion would be paid by everyone other than the data centres, as extra demand lets more expensive gas generation fill supply gaps while renewables catch up.

Queensland is hit hardest, carrying about $20 billion of the modelled cost, or half the national total. The SEC says a Queensland household on a standard bill would pay an extra $370 a year from 2029-30. Victoria faces $9.1 billion, New South Wales $8.9 billion and South Australia $2.1 billion. The SEC links Queensland's exposure to the state's plan to support new gas and coal stations.

The SEC cited work by the Clean Energy Finance Corporation and Baringa that found New South Wales wholesale prices would be 26 per cent higher in 2035 without matching new supply, against 3 per cent higher where renewables and storage are added alongside the load. It also cited Green Energy Markets estimates that a new coal power station built for a single data centre could cost taxpayers between $15 billion and $20 billion.

SEC chief executive David McElrea said Australians in a cost-of-living crisis "can’t be expected to foot the bill for tech companies and artificial intelligence infrastructure." The council wants mandatory requirements for data centres to bring their own new renewable energy and storage, written into legislation as a condition of grid connection.

Industry minister Tim Ayres told a Senate Estimates hearing on Monday that the government will introduce the legislation "shortly". Ayres said the law will use national rules to ensure the investments do not push up electricity prices, as has happened in other jurisdictions. RenewEconomy noted that Prime Minister Anthony Albanese had promised to make bring-your-own renewables a legal obligation, but later promised carve-outs for states that want gas to power the sector. The SEC warns those carve-outs for Queensland would flow through to prices across the rest of the National Energy Market.

At the end of June, AEMO had 17 data centre projects in its connection queue totalling 9 GW, of which five projects (1.4 GW) were being implemented. RenewEconomy noted the Carbon Zero Initiative's view that data centres appear to reserve twice the capacity they actually use, and that Transgrid says Western Sydney has no room left for new connections.