Bowen seeks AEMC rule requiring data centres to contract firmed power

Chris Bowen, Australia's energy minister, has put a proposed rule change to the Australian Energy Market Commission (AEMC) that would oblige qualifying data centres to cover their power use with firmed energy. The AEMC received the request on 20 October. It envisages mandatory contracting, underpinned by new generation, storage and dependable demand flexibility located in the same market region as the facility concerned. W.Media reported that the commission has not started the process, and that a consultation paper will follow when it does.

The government wants to blunt the effect of fast-rising digital infrastructure demand on prices and reliability, and to stop related cost and reliability risks landing on other consumers. The request relies on the Australian Energy Market Operator's 2026 Electricity Statement of Opportunities, which forecasts data centres drawing 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 demand could outpace delivery of new generation, storage and network capacity, especially as coal plants retire and variable renewables take a bigger share.

Under the design, a data centre would need to show that its contract portfolio delivers enough firm capacity to match when, for how long and how much power it uses. Power purchase agreements, cap contracts, tolling agreements, storage and dependable demand response could all qualify. The supporting capacity would have to come from new investment, and the request suggests a high default standard that might require every eligible firming resource to be new, though ministers could be able to vary that between jurisdictions. Which technologies are eligible, and how high-emissions generation is treated, remain to be settled.

Detailed requirements are open for consideration. The request asks whether obligations should start above a size threshold, whether bigger facilities should face tougher requirements, and whether the Australian Energy Regulator (AER) should look at a facility's whole 24-hour demand profile instead of peaks alone. Checks could occur before grid connection, at scheduled reviews, or after a material jump in demand, with the AER able to assess portfolios and require independent audits. Financial penalties are proposed for breaches, and the AEMC is asked to consider whether non-compliant facilities could be made to reduce consumption until they comply.

The request follows AEMC advice that fed into a reform package agreed on 28 July by energy ministers, excluding those from Queensland and the Northern Territory. The AEMC's recommendation 2 was that new data centres be supported by sufficient firm contracting. A second rule change request, on connection agreements for large energy users, was lodged at the same time. Other rule changes, on recovering network augmentation costs and on the operational visibility of large inverter-based loads, are also in train.

The obligation must be coordinated with the government's renewable electricity obligation for data centres, which aims to tie their consumption to new renewable generation. The request warns that misaligned frameworks could mean duplicated requirements, administrative burden and extra cost. In assessing it, the AEMC will weigh benefits for 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.