Bowen seeks AEMC rule requiring data centres to contract firmed energy

Chris Bowen, the energy minister, has asked the Australian Energy Market Commission (AEMC) to consider a new rule obliging qualifying data centres to cover their electricity use with firmed supply. The request reached the AEMC on 20 October. It envisages mandatory contracts backed by new generation, storage and dependable demand flexibility located in the same NEM region as the facility concerned. The commission has yet to open its process, and a consultation paper is due once it does.

The request draws on the Australian Energy Market Operator's 2026 Electricity Statement of Opportunities, which projects data centres using about 15TWh a year by 2029-30, equal to 7.8 per cent of operational consumption in the National Electricity Market. The projection for 2035-36 is roughly 34TWh, or 13 per cent. The government argues that data centre load could outpace the delivery of new generation, storage and network capacity, especially as coal plants close and variable renewables take a bigger share. The stated purpose is to keep the cost and reliability risks of that new load from falling on other electricity users.

Operators would have to demonstrate that their contract portfolios supply enough firm capacity to fit when, for how long and how much power they draw. Contract types that could qualify include power purchase agreements, cap contracts, tolling agreements, storage and dependable demand response. The backing capacity would have to come from new investment. The request floats a high default standard of newness, possibly meaning every eligible firming resource must be new, with ministers potentially able to vary that between jurisdictions.

Much of the detail is left open, including whether the obligation should start above a size threshold and whether bigger facilities should face tougher requirements. The request also asks whether the Australian Energy Regulator (AER) should look at a facility's whole 24-hour demand profile instead of only peak periods. Which technologies are eligible, and how high-emissions generation is treated, remain to be decided.

Compliance could be checked before a facility connects, then at scheduled reviews or after a material rise in demand. The AER could examine contract portfolios and demand independent audits. Financial penalties are proposed for breaches, and the AEMC is asked whether non-compliant facilities could be made to reduce consumption until they meet their obligations.

The proposal follows AEMC advice that fed into a reform package agreed on 28 July by energy ministers, excluding Queensland and the Northern Territory. A second rule change request, on connection agreements for large energy users, was lodged with it. Other separate rule changes cover recovery of network augmentation costs and the operational visibility of large inverter-based loads. The contracting obligation must be coordinated with the government's renewable electricity obligation for data centres, and the request warns of duplicated requirements, administrative burden and added cost if the two are misaligned. In its assessment the AEMC will weigh gains in reliability, wholesale prices and new capacity against compliance costs, the availability of firming contracts and the risk of requiring more capacity than facilities use while ramping up. No final requirements or implementation timetable have been set.