Sites Are Scarce, Backlash Is Growing

As the easiest and best sites for data centres are snapped up and community backlash continues to grow, the data centre boom in Australia may be at an inflection point. How server sheds will be handled by governments, planners, financiers and society at large are being interrogated as the sector—along with the technology and design of data centres—evolves. Mandated new renewable energy is a particular sticking point, with Commonwealth legislation expected to be tabled in 2027. The details of what that legislation will include remains mysterious. Although Prime Minister Anthony Albanese appeared to declare that a deal on energy had been reached at a National Cabinet meeting held on August 26, attendees gave conflicting accounts of what had been agreed . DLA Piper partner José de Ponte told The Urban Developer that “There’s some hints as to where things might go, but I think the real problem right now is getting too swept up in worst case scenarios”. “As opposed to allowing the obvious issues to be ventilated and for the policy to be crystalised in regulation,” de Ponte says. “Its really difficult for the market, of course, because people need detail to be able to plan and deliver their projects,.” De Ponte says that advice from the Australian Energy Market Commission, given to energy ministers at the beginning of August, has four policy recommendations which form the basis of current debates. ▲ The locations, built forms, and operating and business models of data centres are likely to transform during coming months. Those include driving renewable uptake through the use of the existing Renewable Electricity Guarantee of Origin certificates scheme; an obligation that data centres contract for firming capacity; market registration requirements for data centres; and supporting co-location through connection agreements. However, de Ponte says, “the devil is in the detail”, and the next 12 to 24 months will help clarify the situation. “Policy is always drafted or painted in broad brushstrokes. The challenge will be in translating what is now essentially broad-brush policy into real legislative and regulatory drivers.” Staged development models may be blended During the next decade, the Australian Energy Market Operator expects data centres to grow from 3 per cent of current east coast energy demand to 13 per cent. ▲ DLA Piper partner José de Ponte says that the AEMC recommendations give some indication of how impending legislation may be shaped. One of the major technical challenges for proponents, and the grid at large, is matching data centre development timelines to those of wind or solar farms. Renewables sector advocates have spoken in support of a staged approach , in which data centres would proceed under the understanding that their matched renewable generation would lag by a few years. De Ponte says that the recommendations recognise the fundamental mismatch in timelines. “They propose two particular fixes, but they’re discussed in very broad terms. “The first is the possibility that data centres that have contracted for new generation would be able to get the benefit of those arrangements brought forward, even though the capacity isn’t available immediately. “The second option would be to allow REGOs from existing operators, as a temporary transitional arrangement to allow time for new generators to be built and connected.” ▲ Wind farms take about seven years to develop and solar farms four, compared to data centres’ two-year timeframes. According to de Ponte, both solutions could work, although a combination might be better. “I would hope ... that in developing the regulatory regime it is recognised that a multi-path approach to achieving compliance is best. “Data centres won’t all have the same development profiles. So the more solutions that you can put in front of the industry, the better.” Energy technologies, contract models, still not settled TBH Consultancy global data centre lead Rob Hammond says that “there’s a lot of soundbites out there, but the broad intent is that we make data centres sustainable”. “There’s a growing recognition that social license is important to getting the approvals that you need,” Hammond says. While political players may have their own reasons for supporting gas-fired baseload or firming generators, data centre proponents have a different set of calculations. ▲ The NT’s Lia Finocchiaro and Queensland’s David Crisafulli have supported gas turbines for baseload or firming power. Hammond says that gas turbines are relatively quick to stand up, are considered less polluting than coal, and may have cost factors that make sense for a data centre proponent. “The jury’s out in terms of sort of how fast we can move towards solar and wind. There’s practical reasons why we can’t build them as quickly as we’d like, and so gas is sort of seen as an intermediate measure, but not a permanent end goal,” Hammond says. Some proposals, including the Southern Highlands Data Centre 115km from Sydney , are calling for sovereign gas-fired baseload generation. De Ponte says that the AEMC advice includes “a real push to behind-the-meter solutions”, particularly in the form of Battery Energy Storage Systems. “You can actually see it in the way that the policy recommendations have been structured. It becomes a no-brainer to include a BESS as part and parcel of your data centre. ▲ On-site battery storage may be incentivised for data centres under forthcoming legislation. Under the advice, batteries “reduce your REGO requirements, go directly to the firmness of your contracting obligations” and are “expressly called out for incentivisation in the recommendations”. Co-location an option for some Power Purchasing Agreements (PPAs), or contracts between energy users and providers, typically don’t specify that new generation is co-located. Planning Institute of Australia national policy head Nicole Bennetts likens PPAs to affordable housing contributions, which can take many forms instead of being ring-fenced to a particular development. Bennetts tells The Urban Developer that “really, the key thing that data centers are looking for is being on high-voltage power”. “They’re always on infrastructure, which means they don’t have the typical demand and shut-off that other industrial land uses might have in terms of co-locating them with renewable energy,” Bennetts says. “We’re not arguing for one particular model, but rather that we need to do the planning work. We actually need to look at what the options are in terms of making sure that there is sufficient power.” ▲ Planning and siting are critical to energy considerations and social license, experts say. Bennetts says that current industrial-zoned land emphasises logistics and transport connections, rather than energy or telecommunications infrastructure. The federal government has an opportunity to collate existing planning and environmental data sources, and provide insight into”what the pipeline might look like and how the states can best be ready”. “So that when proposals come in, states have already planned with confidence about where they’re best located.” However, experts say, the legislative and regulatory work needs to be done both quickly and well, in order to assuage community concerns over data centre impacts, and provide certainty to international capital. Hammond says Australia is on the cusp of building a new industry “exporting megabytes to Asia”. The government’s role is to take “a portfolio view of building infrastructure that supports each other, and directing that”. “There’s benefits for local economies, and jobs, and all sorts of things. So there’s a whole lot of benefits from that approach.”

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Patrick Lau
Mon 07 Sep 26

Sites Are Scarce, Backlash Is Growing

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