Bowen seeks rule change forcing data centres to contract firmed energy

Chris Bowen, Australia's energy minister, has lodged a rule change request asking the Australian Energy Market Commission (AEMC) to consider forcing qualifying data centres to cover their power use with firmed supply. The AEMC received the request on 20 October. It envisages mandatory contracts backed by new generation, storage and reliable demand flexibility located in the data centre's own market region. The commission has yet to begin its process, and a consultation paper will follow once it does.

The request draws on AEMO's 2026 Electricity Statement of Opportunities, which forecasts 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 same projection reaches roughly 34TWh, or 13 per cent, by 2035-36. The government argues demand may grow faster than new generation, storage and network capacity can be built, especially as coal plants close and variable renewables supply more of the mix.

Operators would need to demonstrate that their contract portfolios supply enough firm capacity to match when, for how long and how much power they draw. Power purchase agreements, cap contracts, tolling agreements, storage and dependable demand response could all qualify. A central feature is that the backing capacity must be newly invested. The request suggests a high default standard, potentially requiring every eligible firming resource to be new, though ministers might be allowed to vary that between jurisdictions.

Several design questions are left open, including whether obligations should start above a size threshold and whether bigger facilities should face tougher requirements. The request also asks whether the Australian Energy Regulator should look at a facility's whole 24-hour demand profile instead of just peak periods. Compliance could be tested before connection, at scheduled reviews or after a material rise in demand, and the AER could assess portfolios and require independent audits. Financial penalties are proposed for breaches, and the AEMC is asked whether non-compliant facilities could be made to cut 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 those from Queensland and the Northern Territory. A second rule change request, on connection agreements for large energy users, was lodged at the same time. The obligation must also be aligned with the government's renewable electricity obligation for data centres, and the request warns of duplication, administrative burden and added cost if the two are not coordinated. In its assessment the AEMC will balance gains in reliability, wholesale prices and new capacity against compliance costs, contract availability and the risk of requiring more capacity than facilities use while ramping up. No final requirements or implementation timetable have been set.